ROI: PdM's secret weapon?


Mar 31, 2010

The inaugural “State of the Condition Monitoring Industry” survey, recently completed by Plant Services for Azima DLI (, suggests that predictive maintenance (PdM) programs are widely perceived as cost-effective and important to the financial health of manufacturers, but often fail because return on investment (ROI) is hard to prove and the programs are difficult to manage and support.

The survey was conducted in February, 2010, and included responses from 163 Plant Services subscribers, primarily middle management and plant engineers. Of those surveyed, 65% have a machine condition monitoring/predictive maintenance program in place. The top three components of those programs are vibration analysis/monitoring, lube oil analysis, and thermography. Of those who don’t currently have a program in place, 16% plan to start one this year.

While the majority of respondents agree that predictive maintenance programs directly affect the bottom line, when queried about barriers to success, difficulty demonstrating ROI was one of the top factors. ROI remains an important measure of program traction that resonates with the C-suite.

“In the survey, 32% of respondents said ROI is hard to prove,” says Burt Hurlock, CEO, Azima DLI. “If you can gather the information and agree on how to calculate it, it’s actually easy to prove.” Plants must adopt the right technology and partner services to enable managers to better capture and report the benefits of condition monitoring programs, focusing on metrics such as decreased downtime, improved productivity, and cost savings related to improved equipment health and reliability.

“We’ve worked with the U.S. Navy and tracked the ROI since 1977,” Hurlock says. “It’s never been less than 12:1 and has ranged up to 23:1.” That’s the ratio of maintenance costs savings – reduced labor, avoided machine damage, elimination of unnecessary maintenance, and overhaul optimization – to the cost of condition monitoring systems, labor, and services on a fleet of aircraft carriers. “And the Navy doesn’t consider any costs associated with lost production or lost opportunity,” he adds.

Some 25% of respondents indicated that their program isn’t viewed as strategic by C-level executives. “We find that upper-level management typically falls into one of two mindsets. The top companies recognize investment value, and will do anything that makes economic sense,” Hurlock says. “The others have decentralized management – we call them ’60s companies. The executives are business people and abdicate responsibility for anything directly related to manufacturing to the plant managers. The plant managers are budget-driven and many haven’t been trained to think in terms of investment and return. They think visibility might be used against them when they could be using the numbers to get the resources they need from management.”

An overwhelming majority (76%) of respondents indicated that they’re satisfied with current programs, but more than half acknowledge that it’s difficult to know exactly what solutions and tools are needed to maintain a successful program. Insufficient staff, limited in-house expertise, and poor training topped the list of factors that degrade the results of PdM programs.

Because of an exodus of talent, streamlined operations, and restricted budgets, Azima DLI found that many plants are challenged to retain the expert analysis resources necessary to keep their condition monitoring programs running smoothly, or simply don’t know how to initiate a fresh start for a previously well run program.

“The survey corroborates our projections of outsourcing as a trend in predictive maintenance,” Hurlock says. “This crystallized in the recession of 2009, when companies that started to build out complete in-house programs found their budgets cut, and their survival depending on lean, reliable, agile manufacturing. They came to us for PdM services.”

For those with a condition monitoring/predictive maintenance program in place, just over half of the respondents use a combination of in-house and outsourced solutions. While only 8% currently outsource data collection and analysis, based on this survey, outsourcing might be on the rise: Of those handling programs in-house, 53% responded they believe there are benefits to outsourcing the program.

In considering a partner for third-party support, the following factors were ranked, in order of importance, as most influential in making that decision:

  • Analytical software and services
  • Ability to speak with a customer service representative 24/7
  • Advanced reporting capabilities
  • Web-based or on-demand access to data analysis

“While the benefits of an effective condition monitoring and predictive maintenance program are clear to plant personnel and management, many programs have been left on autopilot during tight economic times,” says Hurlock. “We believe one of the keys to long-term success is greater visibility among the C-suite regarding the quantifiable impact these programs can have on productivity and plants’ ability to comply with important industry standards for reliability. For example, by investing in cost-effective data collection analysis capabilities, plants can make informed maintenance decisions and generate results in terms of cost-avoidance related to unscheduled downtime and unnecessary repairs.”